Trust and corporate cash holdings

Dudley, Evan; Zhang, Ning

doi:10.1016/j.jcorpfin.2016.10.010

Cited by 146 publications

(72 citation statements)

References 48 publications

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“…In Table 5, we report the results by estimating six country governance indexes, and find that the effect of trust in reducing the cost of debt is related to government effectiveness, control of corruption, political stability, and voice and accountability, but less correlated with regulatory quality and the rule of law. Bris and Cabolis (2008), Dudley and Zhang (2016) and Martynova and Renneboog (2008) propose that formal institution can lower transaction costs, and hence in our study four dimensions of country governance quality are observed to lower the cost of debt. However, Gilardi (2010) points out it has proven very difficult to differentiate between possible causal mechanisms given the existing state of theory and available econometric techniques in practice.…”

Section: Further Discussionmentioning

confidence: 68%

“…The first one is personal trust, which is the set of beliefs of a certain firm or individual. The second notion is societal trust, which could be viewed as a set of beliefs of a group of firms or individuals (Dudley and Zhang, 2016). While both types of trust are important in the financial market, this paper mainly focuses on societal trust.…”

Section: Theoretical Background and Hypotheses Designmentioning

confidence: 99%

“…Third, trust among people improves the information flow of the market and therefore reduces the monitoring cost of creditors (Pevzner et al, 2015). Fourth, trust could serve as a way to mitigate the agency problem which could also lower the cost of debt (Chami and Fullenkamp, 2002;Dudley and Zhang, 2016).…”

Section: Introductionmentioning

confidence: 99%

“…Following earlier studies (Dudley and Zhang, 2016;Guiso et al, 2008aGuiso et al, , 2008b, we measure trust at a country level based on the citizens' average response to the question in the World Values Survey (WVS) and the European Value Survey (EVS): "Generally speaking, would you say that most people can be trusted or you need to be very careful in dealing with people?" 1 By examining 6,098 issues from 24 countries from 1996 to 2015, we find firms with a higher level of societal trust have a lower cost for borrowing debt.…”

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Trust and the cost of debt financing

Meng

Yin

2019

Journal of International Financial Markets, Institutions and Mo

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Section: Further Discussionmentioning

confidence: 68%

Section: Theoretical Background and Hypotheses Designmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Trust and the cost of debt financing

Meng

Yin

2019

Journal of International Financial Markets, Institutions and Mo

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“…The Shareholder Power Hypothesis supports this positive relationship. This means that the shareholders in the country with a strong shareholder right may allow the managers of the firms to hoard cash, due to the reason that there prevails more social trust in their respective country (Dudley & Zhang, 2016). Also, the substitute hypothesis states that the shareholders are less concerned with the additional cash holdings that are held by the managers.…”

Section: The Results Indicated Inmentioning

confidence: 99%

Do Cash Holdings Differ in Europe and Asia Pacific?

Aftab¹,

Qureshi²,

Javid³

2019

LJB

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This paper identifies the determinants that contribute towards the variation in financial assets that make up a firm’s total cash reserves, specifically in two important regions of the world i.e. Asia Pacific and Europe. The findings of the research reveal that firms in the region of Asia Pacific have slightly higher cash holdings, as compared to firms in Europe. Moreover, the study also identifies that the elevated cash holdings in Asia Pacific are not a result of the agency problem, as is generally viewed, rather, the shareholder power hypothesis is a more appropriate measure to elucidate this elevation in the level of cash holdings in the region. When shedding light on to the firm specific cash holding determinants, the findings of the research reveal that leverage, dividend payment, profitability, growth and net working capital, cash flows and financial strength, influence cash reserves in both the regions, exactly in the same manner. This shows the application of transaction, and precautionary motives in both the regions. The study further identifies that size, and investments have a varying effect in both the regions that are taken into consideration. Again, this difference may be attributed to Shareholders’ Power Hypothesis, specifically for Asia Pacific and the Agency View, specifically for Europe. Shareholders’ Right Index influences cash reserves in Asia Pacific in a positive manner, while in Europe, the same index shows a negative influence. The development in the financial markets has a negative negatively influence on cash holdings in Asia Pacific, and a positive one in Europe.

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Examining the influence of corporate social responsibility performance on earnings management: A global perspective in the context of sustainable development

Le,

Doan

2024

Bus Strat Dev

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This article examines the relationship between corporate social responsibility and earnings management behavior around the world. Using international data from 35 countries between 2003 and 2019, we find evidence that increased corporate social responsibility tends to mitigate the pressure to manage earnings. These findings are robust to alternate measures of earnings management, corporate social responsibility, as well as controlling for endogeneity caveats by two‐stage‐least square and system generalized‐method‐of‐moments estimations. We further show that the negative association between corporate social responsibility and earnings management is more pronounced for firms in countries with high press freedom or high societal trust. The findings from this article provide implications for investors, analysts, business participants, and regulators.

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Trust and corporate cash holdings

Cited by 146 publications

References 48 publications

Trust and the cost of debt financing

Trust and the cost of debt financing

Do Cash Holdings Differ in Europe and Asia Pacific?

Examining the influence of corporate social responsibility performance on earnings management: A global perspective in the context of sustainable development

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